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A Discussion on Armington Trade Substitution Elasticities

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Author Info
Christine A. McDaniel (USITC)
Edward J. Balistreri (USITC)

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Abstract

Applied partial and general equilibrium models used to examine trade policy are almost universally sensitive to trade elasticities. Indeed, the Armington elasticity, the degree of substitution between domestic and imported goods, is a key behavioral parameter that drives the quantitative, and sometimes the qualitative, results that policymakers use. While standard transparent approaches to econometric estimation of these elasticities have been offered for the last 30 years, the estimates are viewed as too small by many trade economists. A few robust findings emerge from the econometric literature: (1) more disaggregate analyses find higher elasticities, (2) long-run estimates are higher than short-run estimates, and (3) time series analyses generally find lower elasticities relative to cross-sectional studies. We offer simulation results to illustrate the sensitivity of general equilibrium models to Armington elasticites. We conclude with remarks on the current challenges that remain in determining these important parameters.

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Paper provided by EconWPA in its series Computational Economics with number 0303002.

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Length: 19 pages
Date of creation: 27 Mar 2003
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Handle: RePEc:wpa:wuwpco:0303002

Note: Type of Document - PDF; pages: 19; figures: included
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Web page: http://129.3.20.41

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Related research
Keywords: Computable general equilibrium; International Trade; Armington; elasticity;

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Find related papers by JEL classification:
F1 - International Economics - - Trade
C68 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Computable General Equilibrium Models

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  2. Clinton R. Shiells & Kenneth A. Reinert, 1993. "Armington Models and Terms-of-Trade Effects: Some Econometric Evidence for North America," Canadian Journal of Economics, Canadian Economics Association, vol. 26(2), pages 299-316, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Scrieciu, Silviu S., 2004. "Assessing the Economic Impacts of Incorporating Romania's Agricultural and Food Sectors into EU's Customs Union: An Applied General Equilibrium Approach," Development Economics and Public Policy Working Papers 30543, University of Manchester, Institute for Development Policy and Management (IDPM). [Downloadable!]
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  2. Rigoberto A. Lopez & Xenia Matschke, 2005. "Food Protection for Sale," Working papers 2005-13, University of Connecticut, Department of Economics, revised Nov 2005. [Downloadable!]
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  3. Michał Gradzewicz & Krzysztof Makarski, 2009. "The Macroeconomic Effects of Losing Autonomous Monetary Policy after the Euro Adoption in Poland," National Bank of Poland Working Papers 58, National Bank of Poland, Economic Institute. [Downloadable!]
  4. Weingarten, Peter & Frohberg, Klaus & Winter, Etti & Schreiber, Catrin, 2003. "Quantitative Analysis Of The Impacts Of Croatiaâ´S Agricultural Trade Policy On The Agri-Food Sector," IAMO Discussion Papers 14932, Institute of Agricultural Development in Central and Eastern Europe (IAMO). [Downloadable!]
  5. Jorge Chami Batista & Nelson Isaac Abrahão Junior, 2005. "Aggregation Problems in Estimates of Armington Elasticities and Pass-Through Effects," Economia, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 6(2), pages 329-355. [Downloadable!]
  6. Kristina Toming, 2006. "The Price Impact Of Adopting The Common Agricultural Policy In Estonia: Estimated Versus Actual Effects," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 45, Faculty of Economics and Business Administration, University of Tartu (Estonia). [Downloadable!]
  7. Yilmazkuday, Hakan, 2009. "Is the Armington Elasticity Really Constant across Importers?," MPRA Paper 15954, University Library of Munich, Germany. [Downloadable!]
  8. Scrieciu, S. Serban, 2004. "Assessing the Economic Impacts of Incorporating Romania's Agricultural and Food Sectors into EU's Customs Union: An Applied General Equilibrium Approach," Impact Assessment Research Centre (IARC) Working Papers 30583, University of Manchester, Institute for Development Policy and Management (IDPM). [Downloadable!]
  9. repec:bep:eaptop:v:4:y:2004:i:1:p:1152-1152 is not listed on IDEAS
  10. Ivanova Nadezhda, 2005. "Estimation of own- and cross-price elasticities of disaggregated imported and domestic goods in Russia," EERC Working Paper Series 05-13e, EERC Research Network, Russia and CIS. [Downloadable!]
  11. González, Manuel & Wong, Sara, 2004. "Elasticidades de Sustitución de Importaciones para Ecuador," MPRA Paper 306, University Library of Munich, Germany, revised May 2005. [Downloadable!]
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